UBS Adjusts China Investment List, Adding Kuaishou and Meituan, Boosting Alibaba Amid AI and Policy Tailwinds

UBS has revised its China Global Equity Focus List, adding Kuaishou (1024-HK) and Meituan (3690-HK), and increasing investment weightings in Alibaba (BABA-US), Ping An (2318-HK), WuXi AppTec (2359-HK), and Xiaomi (1810-HK). The firm maintains a positive outlook on Chinese equities, driven by accelerating artificial intelligence (AI) adoption and an improving policy environment, with technology stocks remaining a core investment focus.

UBS continues to rate Chinese equities as 'attractive' and maintains a preference for technology stocks, citing strong growth momentum from AI, rising corporate innovation capabilities, and accelerated domestic semiconductor development. The firm believes semiconductor firms, AI supply chain players, and major internet platforms will continue to benefit from AI commercialization and renewed international capital inflows into China.

In this update, UBS added Kuaishou to the focus list with a 3% allocation. The firm highlighted Kuaishou's rapid progress in AI, noting its Kling AI model has become one of the world's leading text-to-video generation models, with user engagement comparable to OpenAI's Sora. Although the company faces near-term pressure on e-commerce and advertising revenue, the market is expected to increasingly focus on its AI potential.

Additionally, UBS is allocating 2% to Meituan for the first time. The report states that the most intense phase of competition in China's delivery market has gradually ended. As competition returns to rational levels, the company's profitability is expected to steadily improve from the second quarter onward, with the stock price likely to see a strategic rebound.

Alongside new additions, UBS raised Ping An's allocation by 2 percentage points, Alibaba by 1 percentage point, and WuXi AppTec and Xiaomi by 0.5 percentage points each.

Conversely, UBS removed China Merchants Bank (3968-HK), China Mobile (0941-HK), and Hengrui Medicine from the focus list.

The firm also reduced weightings in China Construction Bank (0939-HK), Midea Group (0300-HK), Yum China (YUMC-US), China Pacific Insurance (2601-HK), and PICC (2328-HK) to rebalance the portfolio.

Looking ahead, UBS forecasts that Chinese equities could achieve mid-teens (around 15%) investment returns by June 2027, supported by improving corporate fundamentals, ongoing policy support, and long-term AI growth trends. The firm believes AI commercialization, semiconductor self-reliance, and technological innovation will remain the primary drivers of China's market performance over the medium to long term.